Under a new rule, insurers covering homes in California may be on the hook for home repairs – even if they exceed the home’s total value.
Earlier this week, the California Supreme Court unanimously denied a review of an insurance group’s appeal of a lower-court decision that favored a homeowner. The high court also denied the insurer’s request to prohibit the use of the lower-court ruling as a precedent for future cases. Essentially, that means the ruling is binding on trial courts across the state.
Celebrate excellence in insurance. Nominate a worthy colleague for the Insurance Business Awards!
Simply put, the ruling means that insured homeowners whose homes have been damaged without being destroyed are entitled to coverage for the cost of repair – even if that cost is far more than the home’s market value, according to a report by SFGate.
The ruling stems from a 2011 kitchen fire that badly damaged the home of Richmond, Calif., resident Marlene Garnes. Her insurer, the California Fair Plan Association, paid Garnes only $75,000, the home’s market value at the time. Garnes sued the insurer and won the right for coverage of $320,549, according to SFGate.
In its ruling in May, the First Circuit Court of Appeal said that a 2004 state law allowed homeowners to recover repair costs – and that insurance coverage is limited to market value only if a home has been completely destroyed or damaged beyond repair.
“Courts have recognized that homes may have values to an owner that are distinct from economic worth, such as familiarity, comfort and the memories they invoke,” Justice Therese Stewart wrote for the appeals court.
Garnes’ lawyer, Dylan Schaffer, said homeowners should be able to depend on their insurance coverage without worrying how fluctuating property prices will affect it.
“The point of having insurance is to be able to fix your house, not to be able to make a profit,” Schaffer told SFGate.
“I must be covered; I have homeowners insurance!”
Court says insurer must pay even when only one of several causes is covered